tv Power Lunch CNBC May 7, 2019 2:00pm-3:00pm EDT
atth's where we're focused on. >> taking the other side of the larry robbins trade. great stuff. appreciate it very much. meg tirrell. thanks everyone, does it for "the exchange. i'll join tyler and melissa for "power lunch" which begins right now. and we'll see you in just a moment i'm melissa lee along with tyler mathisen new at 2:00, get ready for a wild hour of trading the threat of higher tariffs on china fueling a sell-off on wall street time to look for cover or should investors look past this trade drama? and if tariffs do go into effect, the american consumer could end up paying. how is that going to hit retail earnings and the one group of stocks underpriced right now if we do get a trade deal and lyft reporting results after the bell, first as a publicly traded company, stock down 15% since its ipo. time to buy or to bail "power lunch" starts right now >> thanks, melissa welcome everybody to "power lunch. i'm tyler mathisen it is a doozy of a day
the 2:00 p.m. hour has usually been one of the really volatile ones during these big trading days and maybe today will be no exception to that. the dow now down about 500 points as you see there. it is a 2% day, let's call it, across the board as you see by those numbers on your screen we're off the session lows but just by a little bit below 26,000, however, on the dow. the nasdaq getting hit the hardest. it is now below 8,000 at 7941. a few more days like this and we could be on correction watch once again remember that? and at least for the russell 2000 and the dow, they're both down more than 9% from their most recent highs. let's get straight to bob pisani at the new york stock exchange to tell us what's going on and taking us down this hour hi, bob. >> reporter: hello, tyler. this day is different than others with trade worries. it is similar that some of the usual suspects are down. so take a look at the ones down here you see china stocks moving
down there's that mchi. industrials. semiconductors and metals in mining because metals are very economically sensitive on a global level they're all down 2% or 3%. that's normal. big momentum names these are often associated with semiconductor stocks, with software stocks like sales force and some of the names like facebook okay, yeah, we've seen this before that happens as well retail is a very typical target. we have companies like pier one, they get imported a lot of their stuff from china gap, best buy also as well okay, they're down 2% or so but this is a little bit different in that it's broader than that and i want to show you, for example, consumer names. i've been pointing this out all day. these companies here don't really have any appreciable revenue exposure to china overall. why are they down today? because if you assume that tariffs are going to be put on a new level, higher level and for months on end, you're going to have to lower your global growth
assumptions. you'll have to lower your global earnings assumption and the multiple associated with higher growth all of that means that any kind of global company, whether they're selling in china or not, are going to have to be taken down that's why you see it lower here i've been saying for the last two weeks, if you take a look at where we are today, the risk has been to the downside assume we do get a trade deal tomorrow maybe we could go up 100 or 150 points in the s&p but if there is no trade deal and tariffs around are higher levels for months on end into 2020, you could make an argument very easily for 2600 on the s&p you've got to lower your assumptions. so that's what the market is trying to figure out right now back to you. >> bob, thanks markets shook off trade fears yesterday but those concerns are weighing on stocks big time today eamon javers is in washington, the state of play at this hour eamon? >> reporter: no comment from the white house on this 500 point sell-off we see on the dow just now. we'll wait and see whether that picture changes throughout the course of the afternoon but where we are is where we started
the day here in terms of trade yesterday we had a briefing from key trade figures here who suggested that it was the chinese who were the ones who were walking back from commitments they had made in writing during the course of the negotiations on a possible trade deal that's what the white house says prompted the president's tweets on sunday that really rattled the market, no indication that anything has changed since then. we are told that we are still on track now for those tariffs to go into place at 12:01 a.m. on friday morning so bear in mind that the president has walked away from these tariff threats in the past but right now, we're told they're set to move forward with the filing to the federal register this afternoon, beginning all the process stuff that has to take place behind the scenes to put those tariffs in place we'll see the chinese delegation here tomorrow and the rest of the week and really, whether those tariffs kick in on friday is really going to depend on how well those talks go during the course of the week
we'll have that. >> right now, if they do take effect, are these higher tariffs going to have a bigger effect on the u.s. economy steve liesman looks at new numbers. >> kelly, fears are the impact of a bigger trade war going global including the u.s. economy, including u.s. corporate profits and some economists think could even force the hands of central banks around the world karl weinberger said it's a lose-lose proposition. our assessment is that u.s. consumers, voters, have more to lose than the chinese who can and do source everything from food to technology elsewhere ubs estimating full blown tariffs threatened by the president could shave 45 basis points off global growth and a bad hit to u.s. earnings how bad a hit? here's their estimate. if tariffs rise from 10% to 25%, they see a 2% hit point to s&p earnings but if there's a 25% slap of tariffs on all chinese goods imported to the u.s.,
that's another 7 percentage point by ubs economist with a full blown trade war or not can have a decisive impact on the fed and other central banks next move. jeffreys writes, if there is a breakthrough in the trade negotiations, a fed rate hike as soon as 2019 back on the table but the trade war between china and u.s. could force central banks into easing that is contingent upon how domestic economies fare in heightened global trade uncertainties here's what we know. producing tremendous volatility, market expectations for growth, for earnings and interest rates and that's not good for any market, that kind of volatility, unless of course >> steve liesman the bond investor on halftime report with scott talked about volatility in part but certainly weighed in on those trade tensions as well >> i think that you've got irresistible force meeting an immovable object where both
premier of china and president of the united states want to come across that they prevailed and didn't give in which means to me that i think we're going to keep seeing more tension and i think that the 25% tariff bump is better than 50% chance. >> should you look past the trade drama or just do nothing let's bring in lisa eriksson, senior vp and head of the traditional investments group with u.s. bank wealth management kara murphy is chief investment officer with united capital. lisa, you know, often when there are momentous events looming, the best thing a long-term investor can do is nothing do you counsel that right now or is there something i should do >> we are counselling, tyler, our investors to stand pat on their allocations. meaning that whatever they would be typically in terms of stocks and bonds and real estate that they would certainly stay at those allocations and really,
the reason why is if you step back from this trade news, the underlying economy is still chugging along at a slowing and growing pace and so, really, with this kind of thing, there could be a lot of paths that it would take but reacting right now to that level of uncertainty doesn't make a lot of sense until we have more clarity on the future direction. >> kara, a similar question to you. is there any reason to put money to work today or to take money out of the market today before we know what happens on friday >> i will say, i absolutely agree it's most important that investors stay focused on the long-term. however, i would be on pause right now. up until recently, there was very little risk priced into the market related to potential trade wars, where real acceleration of trade wars and so as the market starts to price in this risk again and as trump is really pushing his advantage trying to get greater concessions from china, i would expect continued volatility.
i think eventually, we will get a trade agreement, but the market is going to be bumpy until we get there. >> quite the opposite. the market it seems to me, kara, was pricing in the probability that a trade deal was going to come without any particular bumps along the way or fits and starts. >> it certainly feels that way i mean, i think the market is reacting over the last couple of days that it was not expecting this kind of bump at all. >> so lisa, you recommend investors do nothing at this point in time but are there things within a portfolio or equity allocation that investors should consider doing even if you want to stay along the markets? >> well, we're really advising that our investors and clients stay alert to opportunities but that being said, we think the best thing for them to do is to stay at their current long-term allocations and so that may mean in the interim a little bit of rebalancing and certainly we're on the lookout for opportunities because as we've been talking about that volatility, while it can cause discomfort, actually
also presents some opportunities for entry points if the underlying fundamentals and valuations allow. >> look at sectors then, lisa, are there interesting entry points starting to emerge? >> so over the intermediate term, our favorite sectors in the u.s. equity market are still technology and consumer discretionary. and the basic thesis behind that, longer term tail winds in terms of change and greater share that they're taking in the number of areas in select companies and subindustries of that and the volatility may provide some entry points to the extent that a particular investor is underexposed. >> thank you very much lisa eriksson and kara murphy, we appreciate your time today. boeing is the biggest drag on the dow right now the stock on pace for the worst day in a month barclays downgraded it today saying consumers will avoid flying the 737 max plane for longer than expected even when the grounding is lifted. joining us on the cnbc news
line, the analyst behind the call, david strauss. david, welcome >> thanks, kelly. >> i know it's a guess but is the decline owed to the downgrade on the issues and how much is because of what's happening with these chinese tariff discussions >> i think it's most likely, according to our survey results that we put out today with the tariff discussions, china is a very important market for boeing about 20% to 25% goes to china so anything on the tariff front would impact boeing as well. >> yeah, and i mean, we see the other industrial names that are exposed down about 3%. so we'll give you a percentage point more than that it is interesting because you're saying that people are so hyperaware of problems with the 737 max that they'll check their bookings and make sure they avoid the plane. i'm talking about the customers,
even when they go back to service with the airlines? >> yeah, we conducted a survey to get a sense of where, you know, where consumers' perception is of the issue we weren't exactly sure what to expect with this we don't really have any baseline by which to compare this to, but that's what we were trying to do was really establish the baseline here to be able to gauge the perception of the max as we move forward. obviously, the key result will be when we conduct this survey again which we intend to when the grounding is eventually lifted you know, to see how the perception changes between now and then so we didn't really know what to expect out of this survey. a little over 40% came back and responded that, you know, they would wait an extended period of time before they fly on the max. obviously it's possible for actions to be different than words here so we'll have to wait to see how it plays out. it was an important piece to put out in terms of trying to form
the mosaic in and around what's going on with the max. >> the bull case has always been that the pipeline is so sticky and would take years for airlines to actually replace a max or an airbus order, but we're getting reports, iceland air in the most recent presentation put forth the scenario to replace the 737 maxes with airbus and all airbus fleet. at what point do you think your survey results could translate into the buying patterns of the airlines >> well, we're going to have to see what the consumer reaction is to the airplane once it goes back in service. i think it would take an extended period of time of avoidance out of the flying public for this ultimately to matter that being said, you know, we've already looked at the backlog, the airlines that ordered on the 737 max. there are a number of airlines that we've identified that are
overordered, even before all of this happened and we think could take the opportunity of this to, you know, potentially to reduce the order book while there are airlines that certainly need the airplane, we think there are a number of airlines in the backlog like today that don't need as many maxes as they've ordered. >> it may not be in your wheelhouse but does the ceo muilenburg survive >> i don't want to comment on that right now i'd rather not on that >> do you not have an opinion or they're going to get mad at you and not give access to the company anymore? >> no, at this point, i would say i think in terms of him addressing the issues, i think, you know, he's gotten more out in front of this as we've gone along. you know, based on everything we know to this point, assuming anything else coming out from this, i think our view is he will survive this, but obviously, we don't exactly what could come out beyond what we already know.
>> david, thank you. david strauss with barclays. >> sure. >> boeing worst performer in the dow but hard to find green out there. all over the big sell-off. tech is the worst sector performer but best this year overall. should you buy on this big drop? we'll get into that and lyft reports after the bell what you need to know before the company reports for the first time stay with "power lunch." one-millionth order. millionth order. ♪ there goes our first big order. ♪ 44, 45, 46... how many of these did they order? ooh, that's hot. ♪ you know, we could sell these.
right now. shares of lyft down 3% ahead of its results after the bell its first report since going public the stock down 18% since the ride hailing service began trading just over five weeks ago. justin patterson is an analyst $80 price target one of the highest on the street great to have you with us, justin >> thanks for having me. >> there seems to be a real sentiment change between the time when the company went public and it was on the road presenting its most recent results not too long ago and now what in the earnings can they say will turn that sentiment around >> it's a great question
it's an early stage growth economy so at this point, revenue growth matters a little bit more than profitability. so i would say seeing healthy trends and active riders in revenue proactive rider supporting north of 88% growth this quarter and north of 50% growth next quarter and then improvements in gross margin, if gross margins trending in the right direction, there's more confidence in the markets rationalizing and that's positive for long-term profitability. >> what kind of estimate do you have right now in terms of the growth of active rider which looks like it's really grown dramatically over the past few years but when you look at the most recent quarters between the third and the fourth quarter, it slowed down tremendously. >> it's a relative comparison there. 40% year over year is still healthy. that's what we estimate for q1 we think lyft 4.5 million to 5 million new riders each year and on top of that, those riders
taking more rides on the platform it's more about frequency growth versus rider growth at all costs going forward. >> are we expecting to learn more about contribution margins, justin >> yes so contribution margin is their measure of unit profitability. you should see that expanding closer toward the high 40s over the course of the year so several hundred basis points and then breaking through 50% as we roll into 2020 and that's a function of healthy rates and less promotional activity. >> is this going to impact uber's debut at all? >> i can't really speak to uber. for lyft, i would say, we're just really focused on, is the market rationalizing and is the profitability profile starting to show early signs of improvement? >> how are they going to make money if they ever do make money? >> how are they going to make money? that's the billion-dollar question and it's really just a function of fixed cost leverage.
just like amazon stripped down variable costs over time, improving network utilization and driving more rides per driver helps lift scale and leverage fixed cost over time. we think over the long-term, lyft can get to 20% plus with those margins. >> justin, thank you justin patterson >> thank you big sell-off on wall street. every single sector is lower technology, consumer discretionary, materials they are among the worst performing bad, materials much more on that coming up on "power lunch." let's build a better world for investing. let's always put investors' needs above our own. as investment management professionals, let's measure up. cfa institute.
as investment management professionals, let's measure up. cfa institute. welcome back to a major sell-off on wall street. we're near session lows. the dow down more than 500 points dom chu has the market flash. >> all right so not every stock is down. check out what's happening right now with shares of ncr formerly known as national cash register. those shares up 11% after being halted up as much as 16% this on the heels of bloomberg headlines saying that ncr is said to have weighed a possible sale of receiving takeover interest
interesting note for context, not the first time ncr the subject of takeover chatter. over years, they've been talked about in this realm but still those particular headlines sending it volatilely enough in the upside and now up 11%. more details as we know more here, kelly, back to you. >> that's one green spot probably the only one. dom, thanks. over to michael santoli now for "trading nation. mike >> kelly thank you very much. yes, i am down here at the new york stock exchange. tech stocks getting hammered here along with the broader market the sector having its worst week of the year as trade fears put pressure on the group along with some general profit taking, it would seem frank cavallari your "trading nation" team today frank, in terms of tech, it's been the leader steadily for some time right now giving back a little more than the overall market how does it set it up? >> looking at the ndx, down from friday's high in perspective this is now the seventh decline
of at least 2% since the start of the year. average being 3.5% and the worst being 4.5% going down and each one of those pullbacks eventually reverse and the most important part of that is the pullbacks produce what we call a bear trap where there is bears form downside break and then a quick reversal higher. each one is produced a new all-time high. that's important to consider you know thaur going to bounce relatively soon but that does not produce a high here. tell us the character changed at that point and get more bearish. >> all right so right now, still the possibility that it is another trap for the bears mark, how would you view it right now? would you say tech has basically carried us long enough time to look elsewhere health care is perking up, for example. >> i wouldn't jump the gun here. tech outperformed the broad market by probably 9% or so. a breather is okay it's healthy all you're seeing right now is a little bit of risk off of rotation after the tariff threats and like you said, mike,
health care has gone pretty much straight up the last two weeks but we continue to like tech, we're overweight but would be selective so we prefer software over semis ragt night now less cyclical and sales force, focused on making businesses more profitable and efficient with recurring revenues and that's probably one of the last expenses a business would cut in the event of the recession as long as the fed is patient, the bull market stays in tact and be adding to positions right now. >> all right software over semis to stay away from that china risk that's one idea. thanks a lot, frank and mark for more "trading nation," head to our web site or follow us on twitter at @tradingnation. melissa, back to you. >> trade tensions front and center one sector underappreciated right now and if tariffs do go into effect friday, consumers may end up paying for it how it will impact retail earnings all over the sell-off. down below 26,000 right now. nasdaq below 8,000
to keep support levels to watch from here, stay tuned. >> and now, the latest from tradingnation.cnbc.com and a word from our sponsor. >> one mistake that many traders make is trying to pick the perfect enterprise for a stock they'd like to own here's something to consider why not just buy part of the position you'd like to have? that way, if the stock goes down, you'll have an opportunity to add additional shares at a lower price and improve your ovalcoerl st basis i'm randy frederick and schwab is the better place for traders.
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to give every american the right to remove old, inaccurate search results by going to righttobeforgotten.org. vo: if you have search results that are wrong or unfair, call reputation defender at 1-877-492-6705. welcome back, everyone chlts i'm sue herera here's your cnbc news update at this hour. about 150 acres of forest on fire across russia with the situation reaching critical levels in siberia and russia's far east the fire caused severe damage to a small village in southern russia several people were injured. one woman has been killed. officials hope the situation will be stabilized over the next two days a massive dust storm covered an australian town today the time lapse by andrew thomas
showed the dimming of skies that lingered for about an hour. listen up, sci-fi fans, disney pushing back the release of avatar 2 by a year to december 2021 and announce to debut new "star wars" films in december of 2022, '24 and 2026 the move comes after disney acquired bulk of 21st century fox film and tv assets once again, florida is the most attractive destination for seniors over the age of 60, according to smart assets annual study. behind the sunshine state is arizona and then the carolinas, nevada rounding out the top five states for retirees. always very good tax issues as well thank you, back to you >> 90 minutes until the closing bell rings on wall street right now, pretty much at session lows the dow is below that 26,000
mark 578 points is the loss right now. down by more than 2% leaving the losses there that semiconductor index down by more than 3% and nasdaq by 2.5% and the s&p 500, gone below 2870 down by 2% kelly. >> no let-up in the selling pressure oil market is closing for the day. dom chu at the commodity desk. >> it was the same time yesterday we talked about the reversal in oil prices from negative to positive because of the changing emphasis on u.s. trade deal worries to the geopolitical risks in the middle east and the u.s. carrier group being deployed that narrative see sawed back again with trade today west intermediate prices $661 ad then $69.89. that global economic downside, u.s. and china can't seem to get
trade talks back on task and we are slated to get private sector data on u.s. oil inventory by the american petroleum institute later on today and then tomorrow morning, the official government data from the energy department on last week's inventory numbers. back to you. >> dom, thanks very much markets are selling off as we get closer to the president increasing tariffs potentially on $200 billion of chinese goods. how do individual businesses feel about the effect of u.s. trade policy those answers in our cfo survey. hi, frank. >> good afternoon, tyler just days before the president tweeted about possibly increasing tariffs on china, the cfos in our survey expressed their lowest level of concern over u.s. trade policy since tariffs in china took effect last year. in q2, 40% of all the cfos saw u.s. trade policy with a negative impact on their business but you have to see that's a sharp decline from q4 of 2018 and even from just last quarter. now, in q2, 35% of the u.s. cfos
believe trade would negatively impact business. 45% saying it wouldn't impact their business at all. 15% believing it could benefit their business so we could say rising optimism here in the u.s. but this trade deal seen as a variable that has to be accounted for, especially internationally. when asked, what is the biggest external risk to your business u.s. trade policy was the top answer for cfos in europe, the middle east and africa trade was tied from asia pacific at 20% tied with china, also at 20% only 10% of u.s. cfos saw trade as a risk for their business this is pretty interesting in q1, no cfos saw china as external risk and now 13% of the overall group say they feel that way about the world's second largest economy. back to you. >> frank, thanks drill down on how a trade war escalation impacts two sectors in particular. he said retail earnings could take a massive hit
charlie is saying they're underestimating the upside potential for chemical stocks if we get a trade deal. let's start with you your research here focuses on companies that have the most risk you think that's the likes of best buy, bed bath and beyond, lumber liquidators and target. >> there's a few names in the u.s. not just the current half at 25%, those are the ones at most risk so far, that's not where we're going but the thing we're going to be watching closely. >> if tariffs go to 25% across the board, right now, we're just talking about $200 billion worth of goods butthe president's tweet on sunday said it could go to the rest of them. that would wipe out the rest >> exactly we look for retail earnings to grow over 8% this year if we got the 10% across everything, that would take about 3 percentage points off of that and if we went to 25%,
would take away all earnings growth for retail. >> is that because they're responsible to let the margins get squeezed is there th this assumes good mitigation other countries like vietnam and bangladesh but also a question of what you could price through. we think the average retailer would be able to mitigate or price through 80%. what we've seen so far with the first round of tariffs our work assumes that could be kept up, if they couldn't do that, it would be more than just wiping out earnings growth but see an earnings decline. >> what's the calculus with the consumers' willingness to take a price increase >> great question. if we're going to enter a trade war, this is probably a reasonably good environment for the consumer tax cuts last year with $50 billion or $60 billion 10% tariff on 5 million of imports basically the tax cut goes to zero on the tariffs. so the consumers in a good spot with jobs growth and if you do, might be the time to play deal
or no deal >> we had a guest say auto parts could be a part in this. >> auto zone and o'reilly, advances in space right now. 20% of products will be imported from china directly or indirectly the best sectors are pricing power. we've seen one to two percent inflation auto parts for the first time in a decade so it does appear that the supply/demand balance in auto parts is pretty good and that inflation is actually being priced through in the market do they not have the ability to absorb a price increase? >> the static math, they import more from china. i think someone like best buy or target is probably in a better position than bed bath to be able to mitigate or pass it
through. we wouldn't pick a retail stock just on the tariff issue but if this escalates, those will be ones the people should be more concerned about. >> there's bed bath shares down today. with everkor one sector that could benefit. next guest with a new note saying chemical companies primed charlie charl charlie neivert. if we don't get a trade deal, the chemical stocks, are they fully factored any sort of tariff increase or broadening tariff. >> for the most part, yes. the companies we focused on in this report we were westlake, largely taken accountable and the u.s. not much of an importer so tariffs, you know, on those things, into china are not that much of an effect in being able
to move the volume to other places but had a fairly significant price impact on them for those exports that are becoming increasingly large piece of the overall commodity chemical space, particularly in polyethylene. >> would you say the pullback today in the lion dell, for instance, those are worth the buy or a broader concern that a widening trade war could slow economic growth and therefore slow the demand for chemicals themselves. >> i think that's what we're looking at if the trade war escalates, increasing pressure on the stocks. we already have them, downgraded them months ago in light of not just the trade war but other issues within the space. u.s. chemical, commodity chemical business is predicated on lots of exports based on the shale work and without those sports or those exports going to
sma smaller places not vietnam or china, it's more costly to do the exports and less room to take them up we'll just see a worse one >> how quickly can buyers say and how sticky are orders? >> for the most part, the export market is entirely spot. but depending on whether people take it. there's only so much room but it can be made but always at a price. the buyers on the other side of the ocean know that the u.s. is a bit over the barrel because there's not a lot of new capacity this has been building for a number of years and the result is they have to get it out of the u.s. because there simply isn't any room in the u.s. market to take it and even u.s. domestic price crests. we haven't seen one since the beginning of the year. the ones that have come through, still delayed. it was an april hike that may take place at least in part in may, but typically, already seen
two by this point in the year. >> charlie, great to have you. thanks for your time. >> thanks very much. >> charlie one group hurt by those trade tensions but that's only part of their story. big sell-off for stocks today. the dow down more than 500 points pressing in on 600 those sensitive stocks among them include boeing, apple, caterpillar, they are among the worst performers as you see on r apc llhere "power lunch" will be right back [leaf blower]
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don't get mad. get e*trade and start trading today. welcome back to "power lunch. the bears in charge on wall street today we are near session lows the dow dropped 600 points just a moment ago we're down 592 the nasdaq is the worst performer down 2.5% with tech taking it on the chin as trade tensions escalate. once again, farmers are caught in the cross hairs of a trade war and not the only dc drama weighing on them ylan mui with that story y ylan >> reporter: it's been a one two punch with the ag industry the big battles leave farmers as collateral damage.
first, the trade war with china. all of the rattling in places plunging and i talk to greg mims who farms 3500 acres in georgia and said all of this volatility has hurt his bottom line >> we really need to get some type of trade, you know, agreement worked out because the depressed prices right now are not helping us at all. >> on top of that, he's still wa waiting for relief he's had little help from uncle sam. $3 billion for direct aid in farmers tied up in a political battle over help for puerto rico >> i think you get to the point where you're thinking, i don't think we're going to see anything out of it so it may even be past
frustration and more, i guess, hopeless. >> reporter: none of this is expected to be resolved quickly here on capitol hill back over to you >> ylan, thank you ylan mui in washington to the bond market now rick santelli is tracking all the action at the cme. rick >> reporter: melissa lee, quickly, we had a 7 year note auction to kick off what is going to be $84 billion in supply 10:s and 30s to follow. i gave it a c- that was on the high side. high yield low price but really, the issue is right now it's hard to find investors that are enamored considering all the question marks we'll wait to see how tens look tomorrow and then down one basis point. go to the other end of the curve in 30s down three basis points flattening a bit you could see it on this chart this is an april 1st chart of 10 year minus 2 year currently at 17 what you want to glean from that chart, now reversing and remember that the lowest, the
flattest it spreads was december of 2018 at 10 basis points and that was all the way back to may of '07 we want to pay attention 17-10. that's where it starts to get interesting. melissa lee, back to you >> thank you, rick santelli. let's take a check of the markets. s&p 500 a point off the session lows at this moment in time. technology leading that sector lower and helping to pressure the nasdaq composite to its own 6.10% decline. we'll look at the sell-off next onpor nc "weluh. i'm working to keep the fire going for another 150 years. ♪ for beauty that begins with nature.
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just over an hour of trading left in the day and it has been a wild one could get even wilder as we head into the close and over the next couple of days frankly. the dow down about 600 points. falling below 26,000 the nasdaq below 8,000 and all three of the major indexes having their worst day since right around the beginning of the year. with all that cheery news in mind let's get the traders' take from the nyse. steve grasso, he's director of
institutional sales at stuart frankel. he's a cnbc contributor. he's a "fast money" trader i don't know what else he is but there's got to be lots of other things as well steve, welcome >> you know what i'm a big fan of tyler's that's the most important thing. >> we always like to hear it say it again >> that's right. yeah >> so listen, it looks to me like the market had priced in an awful lot of good news on trade and now some of that is getting priced out do you think this is a lasting move or just a short-term one? >> no, tyler, i do think that it is a short-term one. think about this when you look at the chart, and i'll just reference it over my shoulder here. when you look at the chart, how many of these bad news blips on trade have there been that have been long-lasting? the answer to that is zero the only thing you want to sell the market on is the fed these are fed missteps right here this is the big huge sell-off that we had. that was the fed misstep you want to sell missteps. you want to buy trade negative
headlines. that's what we've seen that's what i do believe will happen now and if you look at the chart, right here we cut the 20-day moving average, we call that -- traders call that the momentum indicator. so you have to tighten it up a little everyone looks at the 50-day but let's look at the 20-day moving average. that was 2915. pierce that. the next support we're going to have is the 50-day moving average, which is 2856 so we've got a little bit of support there. we're just about 10 handles or so above that. the last time we were below the 50-day back here in january so that's going to be a big event for technicians that watch the overall market so we want to defend that level, ty 2856 keep that on your radar. >> so you say buy these trade hiccups because the technicals tell you to. right? the price action tells you to. >> yeah, so you know, it's sort of, you know, six, half dozen of the other. you have to decide which is leading your market. i look for the technicals to confirm what my beliefs are and
the beliefs for me are that every trade negative headline that we've seen thus far, tyler, have been bought in the overall market so i'm not sure how much of this move down had to do with iran and how much of the move down from yesterday and today have to do with trade. what i do know is that trade works itself out the fed is everlasting hope and is the headwind for the market so -- >> you mentioned iran, and we have not really talked about it, and i don't know how much it's playing into what's going on on wall street. but i do note that secretary pompeo, i believe, canceled a trip, citing security concerns -- national security concerns to europe later this week with angela merkel. so iran must be playing in there somewhere. >> i think iran is playing in there to a large extent today. so i think -- everyone was shocked at the movement that we saw yesterday regarding trade where we bounced aggressively going into the close and in midday i think the big effect, the big
question mark su can't quantify iran you can quantify trade, and ultimately that will get resolved however ugly it looks as they're make the sausage but iran is something you can't quantify just yet. >> i agree with you and i totally agree the fed missteps being the reason@markets pull back in a meaningful way, in a way that stays aas opposed to the trade hiccups. at the same time, steve, don't increased tariffs, doesn't that complicate what the fed needs to do and could potentially complicate the communications that the fed makes with the markets? i mean, when we have tariffs that are increased, if we have another round of tariffs, how the fed treats that, how the fed factors that in, that increases the chances i would think of a policy misstep >> sure. and think about what else it increases, melissa i would say that it increases the ability for the fed to defend a rate cut if we have further headwinds. so maybe with the trump administration -- i'm not saying this is the reason why they came
out with these aggressive headlines on trade but i am saying that you know he's a market watcher and he -- i mean president trump if trade goes south, then so do rates. and i think he knows that. so you do have a backstop in the ultimate market. >> all right, steve. he's a contributor he's a trader. he's a "fast money" guy. >> and a fan of tyler's. >> and a fan he's steve grasso. thanks, man. >> thank you it's been a volatile hour. don't go anywhere. we'll get you set up for the final hour of trading. the stocks thaart e leading us lower with the dow down 537. we'll be right back.
we've got the markets down just about 2% right now off the session lows as we head into the close here dom chu joins us now and we're taking a look in particular at the nasdaq which is feeling the most pain biotech is a real source of that pain >> biotech and a couple of earnings reports are probably at the heart of this. you have regeneron, you've got milin. massive moves lower for those particular stocks. it doesn't help the sentiment as all but we've been looking at biotech as one of those gauges or sentiment indicators for overall risk appetite in the marketplace and we already knew that health care was the worst-performing sector in this year-to-date trade it was the best performing one last year in a year of turturmo, or a quarter of it the fact it's gone down as much as it has probably tells you a little bit about how traders are feeling about this we've been highlighting the trade in semiconductors for quite a bit now. you add biotech to that mix. the one place i would say you are seeing just a little bit of
positivity on a relative basis is still in that small cap space. they had been outperformers. they'd been playing catch-up for a while over the past couple of weeks. we'll see if that smaum cap trade keeps the relative outperformance that's u.s.-china trade centric as well. >> we're close to a correction in the russell right now thanks for watching "power lunch. >> going to be a busy hour "closing bell's" all over it starts right now >> it is the final hour of trade for a wild day >> major sell-off in stocks today. let's have a look at the markets. down over 2% for the you nasdaq. the russell and the dow. the s&p down just short of 2% in points terms for the dow we are down 550 points. briefly about ten minutes ago we were down over 600 down 607 points at the low of the session. >> worst day for stocks since january. take a look at who's feeling the pain most. all 11 s&p 500 sectors are in the red right now.yo